The motivating force of the theory of a democratic way of life is
still a belief that as individuals we live cooperatively, and, to
the best of our ability, serve the community in which we live, and
that our own success, to be real, must contribute.- Eleanor Roosevelt

There was a dragon here hundreds of years ago,
here in the Basque country in northern Spain, a place steeped in tradition,
a hilly expanse between the mountains and the sea.

Local lore has it that
the
Basque language, the only European one with no known root
language, is a remnant from the time of
Atlantis, which may have vanished into the Atlantic Ocean not far
from here eons ago.

Standing on a hillside overlooking an early autumn valley, Louise and I were
amazed by the simple beauty of the mountain of the dragon, its gray and
balding peak towering above the town like an ancient ziggurat.

This is
Mondragon, a small town named after the
dragon of the mountain, the dragon probably being, a local resident told us,
a particularly brutal lord or local king who exercised the Rite of the First
Night, a dreaded ritual when fair maidens were whisked away on their wedding
night.

The Rite of the First Night was said to have been common across
Europe throughout the Dark and Middle Ages, although it was probably far
less common than modern folklore suggests.

When a young woman was married,
she was required to spend the night of her wedding with - and lose her
virginity to - the local lord or king.

Oddly enough, all across Europe one still finds remote communities where
most of the people have similar large noses or red hair or big ears and so
on - all descendants of some ancient lord who fathered the first children of
innumerable families.

European society was patriarchal and hierarchal, and
because the king lived in distant Toledo, his defilement role was filled by
the local lord.

The sheer horror of his men coming to take away
the new bride became the legend of the dragon.

Now here is the ultimate irony:

right here in this valley, in the shadow of
the dragon, has grown a business enterprise that - in virtually every way
imaginable - is the antithesis of a dragon.

And for all of us in the United States, this business enterprise represents
a model that can be transformative and sow the seeds of a new kind of
business entity that is, at its heart, more equitable, more fair, and more
just - and therefore more truly American - than the predatory
multinational corporations that are now typical of twenty-first-century
America.

Cooperation and
Corporation

The
Mondragon Cooperative is neither hierarchical nor patriarchal. There’s
no king or lord. The corporation is owned by its employees.

The most highly paid person earns less than six
times the most poorly paid person. Decisions are made by workers on the
front lines and then communicated up to the “managers” for implementation.

And this is no flaky, hippy-dippy commune-like experiment.

It is the world’s
largest federation of cooperatives, employing more than 90,000 people in
more than 250 companies that focus on four areas:

retail

finance

industry

knowledge

In 2008, Mondragon’s revenue was €16.8 billion
($24.2 billion).

All - every last euro cent - of the profits are
distributed in one of three ways:

reinvested in the business

given to
worthy local charities

paid as dividends to Mondragon’s
worker-owners

What Mondragon has shown, by its sheer size, scope, and success, is a new
economic model that avoids the pitfalls of both modern capitalism and
old-fashioned communism.

“Capitalism” has its deficiencies, whether institutions are for-profit
(think Goldman Sachs, where stocks are sold to investors or the public) or
not-for-profit (think Red Cross, where the CEO earns $500,000 per year and
the “stock” is controlled by a board of directors).

Similarly, “communism” has its problems because the state owns the business,
employees are simply agents of the state, and nothing works because nobody
is accountable to anybody and there’s no incentive to do better.

Most importantly, both capitalism and communism are top-down hierarchies
that stifle human ingenuity.

But Mondragon is the world’s largest example of a third way:

worker-owned cooperatives that foster
enterprise as well as equity.

Unlike the top-down nature of capitalism and
communism, Mondragon has flipped that pyramid upside down.

That flipping is apparent when one visits any of the Mondragon businesses.
Louise and I were on the factory floor of an absolutely spotless
washing-machine manufacturing facility of the Mondragon Cooperative in 2009
when we witnessed the true cooperative nature of the enterprise. Like all
Mondragon businesses, this state-of-the-art industrial facility, converting
sheets of raw metal into finished washing machines for sale all around the
world, is run by its employees.

As we stood watching, a group of about a dozen workers assembled electronics
on a U-shaped assembly line.

A “manager” walked up and asked for everyone’s
attention. Our translator shared with us the essence of the conversation:
next Thursday there was going to be a schedule change, the result of some
local event.

At first it sounded like a typical manager telling his employees what was
what.

“Thursday our systems will change, and we’ll
have to produce a different number of units,” he said.

The workers nodded.

Then came the bombshell:

“How do you all think we should do this?” he
asked.

A conversation ensued, and it dawned on me that
the workers were not arguing or fighting or complaining; they were offering
concrete suggestions. With each suggestion others would point out its
strengths or weakness or offer their own.

The “manager” was facilitating the conversation and taking notes. Within 10
minutes some sort of a consensus was achieved, and the workers told the
“manager” how they’d handle Thursday’s change. He thanked them and left, his
job now to communicate up to the cooperative’s administrators how the
assembly line would adjust itself to Thursday’s changes.

This was about as far from the Rite of the First Night as it’s possible to
imagine. In Mondragon, in the shadow of the ancient - and now dead - dragon,
the descendents of the serfs have taken charge. The result is one of the
most successful - and equitable - business models in the world.

And it’s not just the business pyramid that has been upended; there’s a
sociocultural element at Mondragon that is just as transformational to its
local cultures as is the idea of workers owning and running their own
businesses.

Mondragon University was the first institution started here by Don José
Maria Arizmendiarrieta, the priest who began in the 1940s what has now grown
to become the worldwide Mondragon organization. Investing in education -
building knowledge - is like building a factory.

Through Mondragon University they’re investing
in humans just as much as the factories are investing in the business
infrastructure of the towns where Mondragon works. That investment in
educating and training students at a university with strong links to the
cooperatives is evident in the fact that almost all students find work
within weeks of graduation.

Mondragon’s practice of placing people over
profits clearly produces results that benefit all.

Bringing the Lesson
Home
Somehow Americans have lost sight of this.

We see no benefit in any investment that does
not produce profit for the owners, whether the owners are the distant
stockholders or the investors or the top executives. Such an attitude not
only devalues workers but also fails to recognize the importance of
investing in public education, which is particularly tragic given what a
difference education can make in social mobility.

The lessons are right before us and easily measurable.

In 1979 the United States was one of the most socially mobile nations in the
world, but
Reaganomics changed all that. Today the economic class you’re
born into is the single-most influential factor in determining the economic
class in which you’ll die. We are the most socially rigid society in the
world, having just recently surpassed the royalty-bound United Kingdom.

Similarly, when Ronald Reagan took office in 1981, the income-tax rate for
millionaires was 74 percent, which helped keep the average ratio of the
lowest-paid worker in a company to its CEO at around 1:30.

Since Reagan cut that tax rate down to near 30 percent, and George W. Bush
dropped the top income tax rate for capitalists - people who make
their money investing money, who “earn their living” sitting around the pool
waiting for the dividend check to arrive - to 15 percent, the ratio is now
closer to 1:600; and among many of the Fortune 500 companies, it can be
more
than 1:5,000.

We’ve gone from about 25 percent of the
workforce being unionized when Reagan took office to about 7 percent of the
workforce today. Workers are so terrified of losing their jobs that sexual
harassment claims have exploded, and most workers don’t even dare report it.
The new Rite of the First Night perpetrators are senior corporate managers
and CEOs.

The antidote is to spawn Mondragon Cooperatives
of our own.

Time to Think Big
In America we generally know nonprofits and cooperatives to be small, modest
operations that are fueled mainly by the passion and the commitment of a
core group of dedicated believers, including volunteers or underpaid staff.

That public-service mission is true of nonprofits in general. (Of course,
there’s been an explosion of sham nonprofits in the USA over the past few
decades; for-profit companies have moved to nonprofit status to take
advantage of tax exemptions and lower postage rates and then pay their CEOs
huge salaries. But that’s another rant.)

About two decades ago, Louise and I moved to Vermont.

Just down the block from our house was the
Hunger Mountain Cooperative, a member-owned health-food store and grocery.
As members, Louise and I got an annual distribution check (usually around
$100), representing our share of the “profits” of the co- op; and if we’d
volunteered to work at the co-op, we would have reaped greater financial
benefits. In the small town of Montpelier (population 8,035), the co-op was
as big as any local supermarket.

Now we live in Portland, Oregon, and there are numerous similar food co-ops,
mostly small and community based.

These types of community-based nonprofits
and health-food co-ops are the models familiar to Americans. While they have
a good reputation, they are generally seen as inconsequential, economically
speaking. To use the vernacular of the tech world, such co-ops are not
“scalable” and therefore will remain small in size and scope.

But Mondragon, and other large co-ops around the world like
Asiapro in the
Philippines, exemplify another business model.

Every bit as aggressive,
every bit as competitive, and every bit as successful as large for-profit
corporations, the Mondragon Cooperative offers a serious alternative to
predatory capitalism that puts workers first, caters to the needs of
customers, and, perhaps more importantly, establishes a business model that
is fair, humane, and equitable.

Early economic models - frommonarchy to hierarchy to capitalism - represent
ways for the predatory and the acquisitive to rise to the top of the pile
and get as much as they can.

As such they foster the human traits of greed
and aggression.

One way to consider the fundamental issue is to ask:

is the economy here to
serve workers, or are workers here to serve those who own the economy?

The
answer of old-fashioned capitalism - reaching all the way back to
Gilgamesh’s time in 2700 B.C. - is that workers are here to serve the
economy and its owners.

But that can bechanged - and it is being changed all over the world. It is
entirely possible in twenty-first-century America for us to use the tools of
technology and finance to spawn large numbers of Mondragon-like cooperatives
right here.

If a $24 billion cooperative venture can be successfully established in the
remote Basque region of northern Spain, surely it can be done in modern-day
metropolises of the wealthiest nation on earth.